Normalised EBITDA

Definition

The EBITDA in the statutory accounts is rarely the EBITDA a deal is priced on. Normalisation (also "adjusted EBITDA" or "addbacks") removes noise: an owner salary above or below market, one-off costs (litigation, relocation, COVID support), personal use routed through the business, and intercompany flows.

Every adjustment must be defensible and documented, because the buyer tests them one by one in due diligence. A €50k adjustment lifts enterprise value by €250k at a 5x multiple — which is why this is the most valuable preparation step a seller can take, and simultaneously the biggest point of contention.

Worked example

Raw EBITDA = €600k. The owner draws €40k below a market salary (−€40k), there was a €30k one-off legal cost (+€30k), and €15k of personal car costs ran through the business (+€15k). Normalised EBITDA = 600 − 40 + 30 + 15 = €605k. At 5x → the +€25k adjustment = €125k of value impact.

When it matters

Well-supported normalisations raise the price; aggressive or undocumented "addbacks" undermine your credibility and invite price chips. The line between the two is evidence.

Frequently asked

What is the difference between EBITDA and normalised EBITDA?

Raw EBITDA comes straight from the accounts; normalised EBITDA adjusts for items a new owner would not have or would not repeat. Multiples should be applied to the normalised version.

Which adjustments does a buyer usually accept?

Market-rate owner compensation, demonstrably one-off costs, personal use through the business, and non-recurring gains. Adjustments without evidence or with a recurring character are almost always rejected.

How much value depends on normalisation?

At a 4-6x multiple, every €10k of adjustment translates into €40k-€60k of enterprise value. For smaller SMEs, normalisation is often the single biggest lever on the final price.